July 24, 2008

Cuban on HD Fraud, Running NCTA and Gas Prices

The outspoken owner of HDNet talks about how the American consumer is being defrauded on HD by big media and about what he'd do if he ran NCTA for a day.

CFAX: If you ran NCTA for a day, what would be the first thing you’d urge cable operators to do regarding HD?

MARK CUBAN: Besides offer HDNet and HDNet Movies? In a perfect world, I would tell them to promote picture quality as a selling point over quantity and educate customers about which networks are really in HD. These networks bring out the best from the new centerpiece in your living room — your HDTV.

However, the reality is that the major media companies are the ones trying to skate by with SD as HD, and they have either too much leverage over MSOs or very incestuous relationships. So I don’t see it happening unless someone with an eye for the consumer steps in.

CFAX: Speaking of that, will what you’ve called "the consumer fraud" of HD networks presenting mostly upconverted SD fare ever end?

MC: Not unless the FTC or FCC steps in, which we think they should.

CFAX: What will you be doing next in this HD fight?

MC: Educating people in D.C. about the issue and the fact that consumers are being misinformed.

CFAX: You’ve said broadcasters are hurting cable’s case by not trumpeting their own HD offerings. How so?

MC: ESPN comes out and says that its ratings are 43% higher in households receiving true HD signals. Consumers prefer programming in true HD. It makes no sense that broadcast networks aren’t leveraging the same response for their prime-time offerings and promoting that their prime-time shows are in HD and look and sound amazing on your new HDTV. If you don’t have true HD, call your cable provider to get it.

CFAX: You told us that "the future of TV is TV" and that MSOs own the ultimate platform for video. Is this because broadband video will never equal the quality of HD?

MC: Yes, but it’s more than that. One network — the digital cable network — is designed and managed end to end to deliver broadcast video. The Internet has zero internetwork quality of service. I don’t think people will be happy with their American Idol buffering every few seconds. I don’t think the ’Net could support SD quality video with a broadcast reach.

HDNet founder Mark Cuban.

CFAX: A mid-June post on your blog rips YouTube, despite its 130 million monthly visitors, and says Hulu is "stomping it" in revenue per video and revenue per user because Hulu has the right to "sell ads in and around every" video it shows. So, will Google eventually find a way to make money off YouTube?

MC: As long as YouTube hides behind the Digital Millennium Copyright Act, I think they won’t. They will have to create a separate viewing platform with licensed content and try to drive traffic to it. If they can leverage their traffic and drive viewers to a "Hulu clone," then they can be successful. If not, all they will have done is become the ultimate bandwidth subsidizer. Think maybe they can switch to gas and subsidize gas prices instead?

CFAX: And what does this all mean for cable operators providing online video?

MC: It means MSOs need to leverage their networks better. Hosting Hulu servers within a QoS environment in exchange for service revenue, spots or revenue share could create a new revenue source.

I would be all over content providers to allow networked DVRs before agreeing to allow them to stream the content MSOs are paying per sub for. More important, the only way online video is ever going to rival TV is if MSOs enable it to, technically.

I think the holy grail for Internet video for cable is to move DVRs from the home to the node. Offer me a service where I rent storage on servers at the node that allows me to download all the video I want, or to stream the video I want to that server. Once it’s downloaded to the remote server, transcode it and transmit it to my own personalized channel, say 1001. When I tune to that channel at home, there is my Internet video, or it’s available on demand, just like my DVR’d programs are currently.

Subs would pay five bucks per month to "own" their Internet video. It dramatically simplifies home networking. The DVR hard drive moves from the home to the node, where storage is shared, and hopefully the savings in storage costs in set-top boxes will more than cover the incremental hosting, transcoding and support in a switched digital video network. There is really no good technical reason to ever have a hard drive in a set-top box.

What this means is that a subscriber to this service would use a PC to download whatever [content] to the remote host. To stream, say YouTube or Hulu, it would require coordinating with the sites so the stream is delivered to the node, and transcoded from Flash to Mpeg 2/4 or whatever the network uses, then delivered to customers’ TVs in real time, or hosted on the servers for on-demand retrieval.

Bottom line is that digital cable networks are far better suited for delivery of video, even from the Internet, than the Internet is capable of offering end to end. HDNet would love to partner in testing any or all of these services.

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